Precautionary savings not limited to prudent consumers: IMF paper
Evidence that only prudent consumers can generate positive levels of precautionary savings is false, according to an International Monetary Fund paper published on Thursday.
Agustin Roitman, the paper's author, says a common assumption in standard economic models is that agents are risk-averse and prudent, and it is often argued that prudence is necessary to generate precautionary savings.
Roitman shows that prudence is not necessary to generate precautionary savings in small open-economy models
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